Wednesday, February 12, 2025
Wednesday, February 12, 2025
HomeBusinessPakistan's auto sales take a hit, declined to the lowest point since...

Pakistan’s auto sales take a hit, declined to the lowest point since May 2020

Auto Car sales in Pakistan hit hard by holidays and low purchasing power

Auto industry in Pakistan is going through a tough time, with passenger car sales seeing a sharp decline to the lowest levels since May 2020. According to data released by the Pakistan Automotive Manufacturers Association (PAMA), passenger car sales fell to just 2,844 units in April 2023, down 85% YoY from 18,626 units in April 2022. The overall sales in the first 10 months of the fiscal year 2022-23 (10MFY23) stood at 88,620 units, down 54% from 191,238 units sold during the same period last year.

One of the major reasons for the decline in sales is attributed to a decrease in demand due to the sharp hikes in interest rates, spiraling automobile prices, repeated plant shutdowns, escalating petroleum prices, and reduced consumer affordability. These factors have led to a decline in purchasing power, forcing people to defer their buying decisions. Additionally, non-production days, long Eid ul Fitr holidays, and seasonal slowdown during the month of Ramadan have added to the industry’s woes.

The decline in sales has affected all vehicle segments, with sales of 1300cc and above cars recording a massive 83% decline YoY in April 2023. During the same period, 1000cc cars recorded sales of only 276 units, down 92% from 3,568 units sold in April 2022. Sales of buses and trucks decreased to 152 units in April 2023 from 472 units in the same month last year. Similarly, the sale of jeeps and pickups decreased to 1,619 units from 3,917 units sold during the same period last year.

Sales of tractors dropped to 3,211 units from 4,848 units in April 2022. The sale of rickshaws and motorbikes also decreased to 82,136 units on April 23 against 151,705 units in the same period last year.

Honda Atlas Car (HCAR) and Pak Suzuki have been the worst affected, posting declines of 75% and 74% on a monthly basis to 207 units and 1,474 units, respectively. The decline in sales has also affected auto financing, which has declined consecutively for nine months, with the March figure down by 12.83% YoY to record Rs317 billion. Auto financing used to contribute significantly, accounting for 30% to 40% of total auto sales, but it has now dropped to zero.

The auto industry’s situation is a cause of concern for the government as it is one of the largest contributors to the country’s manufacturing sector and provides employment to a significant number of people. The government is aware of the challenges faced by the industry and has taken some measures to provide relief to auto manufacturers. In March 2022, the government announced a package of incentives for the auto sector to help revive the industry and increase production.

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The package includes measures such as the removal of 2.5% additional customs duty on CKD imports of vehicles up to 1800cc, a reduction in sales tax on locally assembled vehicles up to 1000cc, and exemption of withholding tax on registration fees for locally manufactured vehicles up to 850cc. The government has also announced the establishment of special economic zones for the auto industry to facilitate local production and increase exports.

However, the measures taken by the government have not yet translated into any significant improvement in the industry’s performance. The industry still faces challenges such as a shortage of skilled labor, high input costs, and low productivity. Additionally, the industry is also facing increased competition from imported vehicles, which are cheaper due to lower taxes and duties. Auto sales in Pakistan hit a new low due to non-production days, Eid holidays, and declining purchasing power. Car sales dropped by 85% YoY, while auto financing declined for nine consecutive months.

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